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Low Carbon Palm Oil for Indonesia?

An upcoming United States-Indonesia partnership is an opportunity to tackle deforestation.

In a June visit, President Barack Obama and President Susilo Bambang Yudhoyono are expected to formalize a new “Comprehensive Partnership” between the United States and Indonesia, two of the world’s leading greenhouse gas-emitting nations. While the details of this partnership have not yet been released, one thing is certain: a true comprehensive partnership between these two countries is an unprecedented opportunity to address the global climate challenge through reducing emissions from deforestation.

Indonesia has announced that a key strategy for “low carbon prosperity” is the use of degraded land rather than forested or peat land for oil palm plantation expansion. The effective implementation of this strategy—combined with international support for avoiding deforestation—can help protect Indonesia’s globally significant carbon- and biodiversity-rich tropical rainforests while promoting local prosperity.

At the same time, in response to growing global and local demand, Indonesia aims to approximately double its current palm oil production to 40 million metric tons per year by 2020. By some estimates this will require an additional 5 million hectares of oil palm plantations (an area larger than Switzerland).

Current expansion plans include the conversion of forest and peat land. (Photo: WRI)

Palm oil is a lucrative crop; it is used as a common cooking oil and biofuel, as well as an ingredient in many processed foods and cosmetics. Palm oil production generates profits, employment, infrastructure development and government revenue.

Even with substantial yield improvements, further expansion of land use will be necessary to achieve these production targets. Many plantations are already planned on land that is currently forested. If the planned expansion occurs at the expense of forest and peat lands--—as it has in the past---Indonesia will be unable to achieve its emissions reductions target and the world will suffer the irreplaceable loss of Indonesia’s biodiverse tropical forests.

An Alternative: Palm Oil on Degraded Land

An attractive alternative is to expand palm oil production on degraded land instead of forested or peat land.

In this context, degraded land refers to areas that were cleared of forests long ago and that now contain low carbon stocks and low levels of biodiversity, such as alang alang grasslands. According to economic analyses by WWF1 and Indonesia’s National Development Planning Agency2, as well as fieldwork carried out by WRI and local partner Sekala, many of these areas have suitable soil for oil palm cultivation, can produce comparable yields relative to recently deforested land, and are viewed as underproductive by local communities.

Area cleared of forest where alang alang grass and tropical bracken now dominate the landscape. (Photo: Sekala)

A number of studies indicate that there is enough degraded land to accommodate Indonesia’s expected oil palm expansion past 2020. The Indonesian government estimates that a strategy that diverts future oil palm expansion away from peat to degraded land could reduce projected greenhouse gas emissions by 37 percent without a significant reduction in total economic benefits.

The Challenge: Implementation

Recognizing this opportunity, WRI and Sekala have been working to divert planned oil palm plantations away from forests to degraded land instead—a kind of “land swap”—in West Kalimantan, Indonesia (see project POTICO). WRI and its partners have identified four key challenges to implementing an effective, equitable nationwide strategy for using degraded land for plantation expansion:

Technical. Policy-makers lack the accurate land cover and land use spatial data needed to develop and implement an effective degraded land utilization strategy. This shortcoming constrains the government’s ability to identify degraded land suitable for oil palm expansion and to conduct land use monitoring and enforcement activities.

Legal. In many areas, physically degraded land is legally classified as “forest” and therefore unavailable for agricultural expansion, while forested land is legally classified as “non-forest” and therefore at risk of conversion.

Social. Oil palm plantation projects face high risk of social conflict due to land tenure issues. This is especially a problem on degraded lands which tend to have more claims than forested areas. Historically, poorly managed projects have resulted in highly unequal distribution of costs and benefits of expansion, leading to the marginalization of local communities.

Financial. Many permits for plantation development on forested land have already been issued. Changing these permits and ensuring the long term sustainable management of the forest will likely require financial incentives for local stakeholders—companies, communities, and governments—who expected to benefit from plantation development. These incentives could include payments for reducing emissions from deforestation or revenues from low impact forest uses.

A Vision for a United States-Indonesia Partnership

The United States-Indonesia Comprehensive Partnership can overcome these challenges by supporting the following actions:

Develop accurate and up-to-date spatial data to assist Indonesia’s execution of a strategy to utilize degraded land for oil palm development.

Based on this data, revise land use plans (zoning) such that degraded areas are classified for agricultural use while forest and peat lands are classified for conservation or sustainable management, through a process that incorporates best practices in participatory spatial planning.

Develop financial incentives (e.g., via a fund, low interest loans, or other mechanisms) for companies, communities, and local governments to relocate planned plantations from forested to degraded land, and to generate benefits from low impact uses of the forested land previously slated for conversion.

Establish a public measuring, reporting and verification (MRV) system to enable Indonesia to enforce compliance with the degraded land utilization strategy and demonstrate progress toward reducing greenhouse gas emissions from land use change.